A report issued today by the Certified General Accountants Association of Canada called Where Is the Money Now: The State of Canadian Household Debt as Conditions for Economic Recovery Emerge finds that household debt in Canada reached $1.41 trillion in December 2009, or $41,740 on average per Canadian. That personal debt level means that Canadians, including residents of Cambridge, have the most per capita debt of all advanced countries.
I was interviewed today on 570 News, and I made the following comments:
To start, I agree with the findings in the study. I meet with Cambridge residents each week, and there is no doubt we are carrying more debt than ever, and certainly more debt than when I opened our Cambridge Ontario bankruptcy office back in 1999.
I also commented that it’s not just the level of debt that’s a problem. The real problem is the carrying cost of our debt. Here’s what I mean: You might have a $1 million mortgage, but if the interest rate is low, and you have a great job making lots of money, making your mortgage payment may not be a problem. However, if you have a $100,000 mortgage with a high interest rate, and you lose your job, you may have trouble making your mortgage payment. It’s not the size of the debt that matters; it’s whether or not you can carry the debt.
Most of the people I meet with here in Cambridge are worried about two potential risks:
First, they worry about interest rates increasing. Mortgage interest rates, which have been very low for the last few years, are now starting to increase. That can be a huge problem if you have a variable rate mortgage, because if rates go up, your monthly payment increases.
The second worry is income. Ask yourself this question: if I lose my job, or if my hours get cut back at work, could I still make the payments on my credit cards, bank loans, and my mortgage? For the last few months the people I’ve met in Cambridge have told me things are going reasonably well. Toyota employees are back to full shifts, and the construction industry has picked up. But will it last?
Construction workers tell me they are worried about interest rates increasing, which will reduce demand for homes. I’m also hearing that people are worried about the HST that comes into effect on July 1; higher taxes generally are not good for the economy.
I concluded the interview with the following advice:
If you are living paycheque to paycheque, and you worry about losing your job, and you have a lot of debt, the time to take action is now. Start cutting your expenses, and use the extra money to pay down your debt. If that’s not enough to solve your problems, get help. Talk to a credit counsellor (Mosaic Counselling in Cambridge and Kitchener is a not for profit agency that can help with budgeting and debt management plans), or consider filing a consumer proposal or even personal bankruptcy.
Want to find out more? Please call my office in Cambridge at (519) 622-3773, and Howard, Gaye, Danielle or I would be pleased to answer your questions over the phone, or book a time when you can meet with me personally to review your options. There are options for dealing with debt, so call or e-mail me today for a fresh start.
